When Tech Companies War, Do You Lose?

Aug. 7, 2009 — -- History, as they say, is written by the winners. And nowhere is this more true than in consumer electronics. Read the official histories, and every new technology seems to quickly devolve into a duel to the death between a pair of well-run companies, both of which have invented top-notch products.

HP vs. Tektronix, Apple vs. Microsoft, Google vs. Yahoo, Intel vs. Motorola, MySpace vs. Facebook, etc., etc. In retrospect, it always looks like winner versus almost-winner, with consumers always benefiting, whichever side they choose.

The reality, of course, is very different. The truth is that every hot new consumer electronics business -- going all of the way back to radio and television, up through calculators and digital watches to today's smartphones and MP3 players -- is quickly swarmed by scores of competitors, most of them doomed. I can remember, as a young reporter, having to cover 150 new disk drive companies, 50 calculator companies, and something like 80 personal computer companies. Nearly all of them died, of course, typically in a mass shakeout about 18 months after the boom began, leaving only the two or three that make the history books.

The problem is that all of those doomed companies had customers, thousands of them in some cases, all of whom thought they were buying from a winner. And, all those benighted customers, instead of enjoying the fruits of the digital revolution during that period, instead got screwed. They ended up with orphan hardware or software that had no future, no follow-up, no customer support and, ultimately, no company. We regularly trumpet the benefits of Moore's Law, with its ability to make everything digital perpetually cheaper, smaller and more powerful … but Moore's Law only works for consumers who buy successful stuff.

Let me give you an example from my own life -- that is, from a person who makes his living supposedly from being on top of the latest new tech trend. Although my use of computers dates back to the late '60s, when, as a young teenager, I learned to do a little programming via punched cards, then terminals, on mainframes, my first personal computer was an Apple III, given to me by Steve Jobs in exchange for doing some writing for Apple. I could have had an Apple II, but I thought the III was more state-of-the-art. Bad choice.

My next computer was a Corvus workstation, also obtained in exchange for some writing work. Ever heard of Corvus? Yep, bad choice.

Then I bought a Mac IIsi. A nice computer, but I really wanted one of those cool black NeXT computers. Only poverty spared me from that bad choice.

Giving Up on Macs

I gave up on Macs after too many trips to the computer store and noticing that the Mac software section took up a single shelf, while Windows software filled the rest of the store. Besides, a co-author of the book I was writing insisted on a windows machine. So I went with IBM just about the time Apple became cool again. Moderately bad choice.

After the IBM desktop, I switched to an early Toshiba laptop. It weighed a ton and just about dislocated my shoulder on one particularly long business trip. Bad choice. So I switched to IBM laptops. Luckily, the one I bought was built like a tank -- except for the hinge connecting the CPU to the display. Moderately good choice.

After a couple IBM laptops, I bought a Sony Vaio to take with me on a two month job in London. I still use it -- and despite the fact that I've probably written close to a million words on it (a quarter of the keys are now missing their letters) it has worked like a champ. A good choice.

Adding it all up, I figured I've batted about .375. If this were baseball, that'd be more than enough to get me into the Hall of Fame. But, rather, this is my money, not to mention my productivity, and in that light I've been a near-failure. And this is what I do for a living.

Part of this, I'm convinced, is just pure over thinking. I know the companies, I know the people, I know who ought to succeed -- or at least who is taking the most interesting risks. But those are exactly the wrong criteria when making a purchase. Instead, you should make either the safe choice of going with the industry leader, or hitch your wagon to the rising star/industry genius and not give a damn if you detest that company or individual.

But there is another factor at work here: timing. By this I mean where you sit on the continuum between early adopter and truculent troglodyte. Gordon Moore -- yeah, that Moore -- once made the case that, contrary to myth, it is better to not be the first company into a new market. When it comes to the technology party, sometimes it's best to be fashionably late. The reason is that there are so many unknown risks and unforeseen obstacles to market pioneers that they almost always end up falling on their faces and quickly being outpaced by trailing firms that learn from their bad example.

Should You Be an Early Adopter?

I think that's true for consumers as well. We all know gearheads, classic early adopters of any new tech gadget …who forever make the wrong choice. They study the reviews on CNet or G4 television, read the coverage in the trade media, talk authoritatively about the superiority of a particular product -- and six months after they've bought the item, they quietly get rid of it and never mention it again (or deny they ever owned it). Meanwhile, their non-techie friends, the ones who only buy stuff because "everybody is getting one," inevitably, end up happy with classic, enduring products.

So, should you never be an early adopter? Ah, well, it's not that simple. You see, every once in awhile, the first company into a new market manages to hold on and reap billions: Think Intel with microprocessors. And by the same token, with consumers you can never discount the coolness factor. Those folks who camped out overnight and bought the first iPhone enjoyed, for a few days at least, a glowing cultural penumbra that they probably never experienced before or since.

Or think of those college kids who were the first on Facebook or Twitter. Like it or not, cool has value -- and if that value is high to you, then the risk (and the expense) of embracing numerous losers to find one winner may be worth it. For the rest of us, though, it is probably too costly.

So, is the answer for most people just to stay as far away from the cutting edge as possible? I used to think so. I had a 92-year-old neighbor who had a black and white TV, no washing machine or dryer, and a rotary phone -- and she seemed enviably content with her life. OK, so maybe that's going a little too far. After all, I can't imagine life now without my laptop, broadband connection, digital cable, MP3 and a smartphone. But might it be possible to just hang back a ways from the zeitgeist, sacrificing a little performance in exchange for lower prices and proven products?

Perhaps. But I just got a reminder of the dangers of loitering in the back of the pack.

The Risks of Falling Behind

The wireless router in my house crashed the other day, and my wife and I decided it was time to upgrade the whole cable set-up in the house -- something we hadn't done in a couple years. It was only then that we discovered, to our astonishment, that the new, more powerful service was a whole lot cheaper than the old one. It turns out that, while we were weren't looking, the fee structures had changed completely…and by not changing with it, we had probably wasted a couple thousand bucks.

Needless to say, that set off a flurry of looking into all our other subscription plans (cell phone, antivirus, etc.). It was a painful reminder of yet another truth about technology: Opportunity in consumer electronics is a window of opportunity, but that window is on a moving vehicle…and if it can be expensive to get ahead of that opportunity, it can be even more costly to fall behind.

That said, go check your billing plans right now. Take it from somebody who should have known better.

TAD'S TAB: Sometimes, you may find yourself in a situation that requires a clarification of awesomeness. Although this culture of awesomeness is something new, it is rapidly growing in all forms of media. Thankfully, we have the Periodic Table of Awesomeness to give us classifications and rankings for the high points of awesomeness in our world -- including William Shatner, Doritos, and Rayguns. http://www.dapperstache.com/index.php?contenttype=ptoa

This is the opinion of the columnist and in no way reflects the opinion of ABC News.

Michael S. Malone is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, The Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is the author or co-author of a dozen books, notably the best-selling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNews.com "Silicon Insider" columnist since 2000.